At Issue D.C. - The Commercial Office Sector is a Significant Driver of Our Local Economy

At Issue,

The Commercial Office Sector is a Significant Driver of Our Local Economy

The impact that the commercial office sector has on the District’s economy cannot be ignored. In addition to providing a productive work environment for tens of thousands of local businesses and workers, commercial and industrial properties contribute to their community in myriad ways.  
Commercial buildings constitute an integral component of our local ecosystem, generating real estate tax revenues that help to pay for critical local government services such as schools, law enforcement, infrastructure, sustainability efforts, and ensuring a safety net of human services for our most vulnerable citizens. And they do so while requiring relatively little in return in terms of demand for public services. Not only does this amount to a net financial gain for the community, but every real estate tax dollar collected from the commercial class helps to keep tax rates lower for residential taxpayers.  

But the impact of the commercial office sector extends far beyond that.  Renowned local economist Dr. Stephen S. Fuller has produced some eye-catching findings on the incredibly broad scope of the commercial real estate industry’s impact on the local economy. In a study conducted for the Building Owners and Managers Association (BOMA) International in 2020, Dr. Fuller found that the operation of commercial office buildings is a major source of economic activity, jobs, and personal earnings, all to the benefit of their host economies.  

Across the Washington Metropolitan region, office buildings represent a collective contribution to the local economy in excess of $8.2 billion annually. They account for more than 61,000 jobs and nearly $2.5 billion in new taxable personal earnings each year. This doesn’t even include the one-time benefits generated during construction.  

According to a 2021 study conducted by then Interim D.C. Chief Financial Officer Fitzroy Lee, commercial properties (primarily office buildings) accounted for roughly 65 percent of the real property taxes collected in FY 2019, for a total of roughly $1.75 billion in revenues. This constitutes almost 30% of the District’s own-source general fund revenue. Commercial properties also accounted for 22 percent of the total income tax revenues collected in the District. This is not to mention other revenue categories supported by commercial buildings, including: 

  • corporate franchise taxes
  • unincorporated business franchise taxes
  • sales and use taxes
  • deed recordation taxes
  • deed transfer taxes
  • economic interest taxes
  • insurance premium taxes
  • public space rental taxes
  • public utility taxes
  • toll telecommunications taxes

But perhaps even more impressive than the direct impacts are the indirect impacts that office buildings have on the local economy:  

  • For every $1 spent on office building operation expenditures, the local economy gains $2.58.  
  • Each office building operations job supports three additional jobs across all other sectors of the local economy.
  • Every $1 million spent on office operations supports 19.6 jobs.
  • For each dollar of direct operating outlay, $0.76 of new personal earnings is generated, directly contributing to the state and local tax base.  (Operating outlays average $8.49 per square foot.  That’s $6.45 in personal earnings generated per square foot of commercial office space.)

At Issue is compiled by the Apartment and Office Building Association (AOBA) of Metropolitan Washington, and is intended to help inform our elected decision-makers regarding the issues and policies impacting the commercial and multifamily real estate industry.  
AOBA is a non-profit trade organization representing the owners and managers of approximately 185 million square feet of office space and over 400,000 apartment units in the Washington metropolitan area.  Of that portfolio, approximately 80 million square feet of commercial office space and 94,000 multifamily residential units are located in the District. Also represented by AOBA are over 200 companies who provide products and services to the real estate industry.  AOBA is the local federated chapter of the Building Owners and Managers Association (BOMA) International and the National Apartment Association.  

Along with input provided by AOBA member companies, the following data sources and references were used in compiling the attached report: AOBA strives to be an informational resource to our public sector partners. We welcome your inquiries and feedback. For more information, please contact our Senior Vice President of Government Affairs, Brian Gordon.